In US Equities: Regime Change Or Positioning Squeeze?
The rotation hype escalated on Tuesday, when US small-caps yet again stole the show.
I've weighed in repeatedly in recent days on this dynamic, which is becoming the talk of the proverbial town in market circles.
The Russell 2000's outperformance since last week's benign read on consumer prices counts as monumental versus big-tech. As the figure below shows, small-caps haven't outperformed to this extent -- more than 1,100bps -- in recent memory.
You have to go back 13 years to find a compa
I took a small position in TNA about a month ago when Charlie alluded to a crash up in small caps. Cashed out this morning for a 34% gain. It’s up even more now, but I’m not much into trading. It was fun, thanks for the cheese.
Small caps are disproportionately affected by higher interest rates vs big tech/large caps. So perhaps one reason for the outperformance may be the expectation that they will benefit more from the expected lower rates. Probably insufficient to explain the whole move but may be a factor.
Well yeah, that’s plainly the ostensible rationale, but the notion that 50bps of rate cuts between now and January is good for 1,000bps of outperformance in four sessions is ludicrous. This is a squeeze.